Author: CA Tarannum Khatri

wealth tax amended rule 2014

On 23th June, 2014, CBDT announced rules 2014 for wealth tax return. These rules shall be come into the force on the date of publication in official gadgets. Rule 3 of wealth tax rules , 1957 shall be substituted with rule named form of return of wealth tax. According to rule, For wealth tax return for assessment year 2013-14 and earlier year, individual , HUF and company can file return in FORM BA and verified it manner prescribed earlier. for assessment year 2014-15 and there after, Individual, HUF and company has to file return in FORM BB.(new form) and verified in the manner prescribed . For assessment year 2014-15 , the return of net wealth under sub rule 1 shall be filed electronically with digital signature. Still, individual or HUF  to whom section 44AB of the income tax not applicable can file return of income in paper form for assessment year 2014-15. There is no requirement to attach documents – computation of tax payable, valuation certificate, proof of interest paid, copy of any account with form BB while filling return. Director general of income tax shall specify the policies , formats , standards for filling wealth tax return and secure transmission of data. You can download FORM BB from following link Click here for...

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6 things should be kept in mind while clubbing of income

  Income earned on income shall not be clubbed: seems confusing right? Don’t worry, I will make it easy. If Mr. A transfers house to Mrs. A and Mrs. A has rented it and earned income. Mrs. A, further, invests this rent income in FD and receives interest. In this case, rent income shall be clubbed with income of Mr. A but Interest income on FD shall not be clubbed with income of Mr. A as it is income earned on income.   Income on accretion of asset shall not be clubbed: Mr. A transfers shares to Mrs. A, Mrs. A receives dividend income. This income will be clubbed in the hands of Mr. A. Now Mrs. A receives bonus shares for shares held by her. Dividend income on those bonus shares shall not be clubbed with income of Mr. A but shall be taxable in the hands of Mrs. A.     Clubbing provision for interconnected transactions: Some taxpayers are smart and they transfer assets not to relatives but to relatives of friends or third party. In that case also, clubbing provision will apply. Taking one example, Mr.A gifts Rs. 20 lacks to Mrs. P. without consideration and Mr. P gifts Rs. 20 lacks to Mrs. A without consideration. Technically clubbing provision will not apply here but as per judgment of the case of CIT vs Keshavji Morarji...

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Clubbing provision for income of minor child

Q. is clubbing provision applicable for income of children? Ans. Yes, if asset is transferred without adequate consideration to minor child (not minor married daughter) , the income arising from that asset will be clubbed with income of transferor. There is also another provision under section 64(1A). According to this section, income arising to minor child shall be clubbed with income of parent. Q. will income be clubbed with father’s income? Ans. When marriage of parents subsists, Income will be clubbed with the income of parent whose total income, excluding the income to be clubbed, is greater. If marriage of parent does not subsist, income will be clubbed with the parent who maintains the minor child in the previous year. Once income is clubbed, it will not be clubbed with other parent in next year. If assessing officer is satisfied with changing the option, he allows clubbing the income with other parent after giving opportunity to be heard. Q. is there any exemption for clubbing of minor child’s income? Ans. There is exemption up to Rs. 1,500 for each minor child. Q.Is there any exemption available for income of minor married daughter? Ans. No, there is no exemption u/s 64 (1A). Q. Is there any income on which clubbing provision will not apply? Ans. Yes, following incomes will not be clubbed with parent’s income. Activity which requires special skill,...

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Know about clubbing provision of income tax by FAQ

  Q.  Why is there need of clubbing? A. Sometimes to reduce the tax burden the taxpayer transfers the asset to another person. In this case, to protect the interest of revenue, the income derived by that asset will be clubbed in the income of transferor. This is called clubbing of income. Q.Which sections are covering clubbing provision? A.Section 60 to section 65 of income tax act covers the provisions of clubbing. Q.If I transfer the rent without transferring house to my wife, will it be clubbed with my income? A. Yes, According to section 60, When income is transferred without transfer of asset, it is deemed to income of transferor. Q. When I transfer some asset by revocable transfer, will clubbing provision apply for income from that asset? A. Yes, as per section 61, When some person transferred asset to another person which can be revoked (cancelled), any income arising from the asset will be clubbed with the income of transferor. Example: If Raj Kumar transfers his office to his wife by agreement mentioning that the asset can be re transferred any time to Raj Kumar, the income arisen from the rent of office is deemed income of Raj Kumar. Definition of transfer and revocable transfer: Transfer is deemed to be revocable if it contains any provision for the re transfer of the whole or any part of...

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Medical expenses and tax under salary head

In salary head, there are many elements. One is medical expenses’ reimbursement. yes, medical expenses are done by employee and bill is paid by employer. In this case, what will be tax implications? Read it in this post. Tax on Medical expenses when bill is paid by employer: First, understand one thing that medical reimbursement is not medical allowance. Both are different things. Medical allowance is fixed amount the employee gets per year from employer. While medical reimbursement is the one which the employer reimburses the employee which the employee has incurred for his or his relatives’ medical treatment. Tax treatment: (section 17(2))Fixed Medical Allowances: Always taxable. Medical facility: If provided in any hospital maintained by the employer. : fully exempt If any sum paid by employer for medical treatment of employee or his family member in the hospital maintained by the government, local authority, in hospital approved under central government health scheme or state government health scheme. : fully exempt If any sum paid by employer for medical treatment of employee or his family member in the hospital approved by the chief commissioner for prescribed diseases or ailments : fully exempt. To claim above exemption, the employee has to show receipt of payment and certificate from the hospital specifying the disease or ailment for which medical treatment was required. If employer has paid group insurance premium for employees...

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